The Subway restaurant near me had a different sandwich special every month. The owner picked one sandwich and sold it at a discounted price.
The two cheapest Subway sandwiches have always been the Cold Cut Combo and the Meatball Marinara. Those were my go-to choices for many years because they were so cheap. The sub-of-the-month price for these sandwiches was about as cheap as they get. $1.99 for a 6-inch, $3.50 for a foot-long.
Frequent customers carried a Sub Club card and received one stamp every time they bought a 6-inch sub or two stamps for a foot-long. To my (veggie) delight, my local Subway also ran a parallel promotion, Double Stamp Tuesdays.
So during the months when either of the cheapest sandwiches was on special, I would go to Subway every Tuesday. I’d order a foot-long Cold Cut Combo or Meatball Marinara sub for $3.50 and get four stamps. I’d eat half and save the other half for another meal.
I usually went with a friend who didn’t care about the promotion and would give me their stamps. Or the person ahead of me didn’t want their stamps and I’d ask the Sandwich Artist if I could have them. Sometimes I’d find extra stamps on the floor.
Eight stamps were worth a free 6-inch sub. So every one or two visits I’d earn a free meal.
Some months have five Tuesdays. Since these two subs had the lowest cost to the owner, one of them would often be the sub-of-the-month. I built a nice stack of freebie cards.
Then, during months when my two favorite sandwiches were regularly priced, I’d order one of the MOST expensive sandwiches, like the Big Philly Cheesesteak, and ‘pay’ with a fully stamped card from the previous months.
Not so much.
Subway hacking probably saved me about $100-$200 over my college years. All that effort and unhealthy/bad tasting food might have prepared me for backpacking the world on the cheap, but it did little for my bottom line.
That’s because extreme frugal maneuvering like Subway hacking, obsessive coupon clipping or sharing bathwater isn’t the road to wealth and happiness. Increasing income and cash flow, high savings rates and reasonable spending habits (with a general frugal mentality) is how to get there.
I can think of a dozen ways I could’ve hustled in college to make a few extra hundred bucks a month to cover the cost of better sandwiches. But I was probably too lazy.
Any money I saved at Subway was spent bar hacking, buying $1.50 pitchers of Miller High Life during the Friday free-chicken-wing happy hour.
Cheapskate college meal planning and extreme frugality are tiddlywinks compared to what I’m focusing on today.
Powerful Financial Maneuvers
A powerful financial maneuver is a big, meaningful action you can take with you finances that have significant long-term impact on building wealth. I’m not talking about buying a hot stock or getting an inheritance.
This is about deliberate, pre-calculated, multi-thousand-dollar money moves. Best of all, these maneuvers are usually low-risk.
Sometimes big savings is hidden in plain view. What if you could save thousands of dollars a year by making a few phone calls and setting up an appointment? If one small lifestyle change could save you tens of thousands of dollars over the course of a decade, would you make it?
Mrs. RBD recently cleaned and reused a plastic straw. That is not a powerful financial maneuver. The cost of the soap and water to clean it was probably more than the straw itself.
I still get my daily office coffee card stamped. Every 10 coffees I get a freebie. Though I’m not building wealth with it, getting a card stamped every day takes very little effort to save a few bucks.
Everyone can find little ways to save money every day. Those pennies add up to small amounts and make you feel good. But it’s the big stuff that really matters.
Here are some significant, low-risk ideas that you may be able to apply to your life to accelerate your wealth building.
6 Examples of Low-Risk Financial Maneuvers to Help Build Wealth
1. Darlin’, You Gotta Sell the Truck
Long before I discovered podcasting, I had a satellite radio subscription. Sometimes I listened to the Dave Ramsey Show to get my fill of finance talk (now I go to Stacking Benjamins).
Think what you will of Dave’s methods. He does inspire a lot of people who need help getting out of debt. Beyond that, some of his teachings are controversial.
It seemed every other phone call on Dave’s show went something like this.
Husband works a blue collar job and makes $30,000. Wife stays at home with the kids. They own two cars, including a sexy new $40,000 pickup truck with a hefty monthly payment. The truck is ‘needed’ for the job.
As Dave is listening to the woman’s sad story about living paycheck to paycheck and going further into debt, you quickly begin to sense what Dave’s advice will be.
In his perfect Tennessee accent, he says, “Darlin’, your gonna have to respectfully sit down with your husband and tell him something he doesn’t want to hear. Y’all gotta sell that truck. Then go buy a beater.“
Selling a car with an oppressive payment can have a big impact on your cash flow. Even better, never buy a car that isn’t well below your means, and never lease a car. Buying a used car or owning a reasonably priced new car over many years is a smarter way to drive.
If you can change your lifestyle, relying on public transportation, Ubering, or living in a walkable/bike-able area are all cost saving measures. If you can’t you might want to look into refinancing your car loan altogether. LendingTree is my favorite place to get quotes on loans.
Big decisions around vehicles and transportation can save you a boatload of cash over time. Invest the savings instead.
2. Cohabitate and Marry
Cohabitation is an easy way to save cash. I know, this isn’t perpetually low-risk as some complications can arise. But if you can live with roommates, or have a long-term partner you intend to marry, it’s a powerful way to save money.
Marriage itself is powerful too. Not only do you get the cost savings and benefits of cohabitation and splitting expenses, the United States gives you a tax break.
When I was dating Mrs. RBD, she moved in before we married and the savings was incredible. Her previous rent payment of $1,400 plus utilities went away, then she gave me $500 a month for rent until we tied the knot. With an extra $1,000 in her pocket per month, she wiped out the last of her student loans in no time. Our combined savings went toward paying for a wedding and buying a bigger home.
In the first year of living together alone, we saved close to $20,000.
3. Refinance a Mortgage
According to a recent report by Black Knight Financial Services (hat tip to Diana Olick at CNBC), $5.2 million people in the U.S. could benefit from refinancing their mortgage. Despite the many years of low mortgage rates, some borrowers can still save money by lowering their rate or changing the terms of their mortgage.
Savings of just $200 per month would add up big-time over the long-term. All it takes is some upfront money to cover closing costs (which can sometimes be tacked onto the loan). Then shop around to find a good rate and initiate the refinancing process.
I’ve refinanced our primary residence and the rental property a total of four times over the years (including a very recent refinance). Each refinance saved me thousands of dollars in the first year! These actions have easily saved me tens of thousands over the last 8 years.
I used LendingTree to get competitive bids on mortgage rates. Super-easy and highly recommended.
For example, let’s say you own a home that you paid $250,000 for five years ago. The original interest rate is 5% and the loan has 25 years left.
The average 30-year mortgage rate available today is about 4%.
If you refinanced that loan at 4% for the next 25 years, the payment would go down by $130 per month. That’s $1,560 per year or $39,000 over the next 25 years.
To increase cash flow, you could alternatively refinance the loan back to a fresh 30-year mortgage instead of 25. Doing that would lower the payment by $246 per month or $2,952 per year.
In both scenarios, the extra cash flow can be used to pay down the mortgage or other debts, or invested in wealth building assets. With compounding, the savings from this simple move will grow each year.
The lesson here is obvious, a lower interest rate on a big loan can be lead to huge cost savings. If you haven’t yet, check the numbers and consider refinancing today. You might be one of the $5.2 million.
4. Get a New Job with a Better Employer
Working for a mediocre employer has a number of hidden costs. These can include high out-of-pocket benefit costs, a crappy 401k, or bad management that makes you want to pull your hair out.
Better employers pay higher wages and have better benefits. They typically pay more towards health benefits, contribute more to a 401k match, and have better low-cost investment choices in the 401k.
Recently I came across a company that offers a family health care plan at a much lower monthly premium than my employer.
So much so, that I was shocked.
I pay almost $700 per month for family health insurance. My employer covers the rest.
For the other company, the cost was around $115 per month. And it was better insurance!
That’s a difference of $7,000. Perhaps the other company values their employees differently. If I worked for a better employer, I could take a $7,000 salary cut and still break even because of the family health insurance savings.
Then there’s the 401k. High 401k fees in a plan add up over time. *
Let’s say you’ve been with your employer for a while and you’ve saved $100,000 in your 401k account. Mediocre companies often have bad investment choices and high plan fees. For some plans, fees can be as high as 2%.
2% in 401k fees equals $2,000 per year of lost wealth on a $100,000 account. Furthermore, if you stretch that loss out over 10 and 20 years, the impact is compounded.
If you compare the 2% plan to a 401k plan with 0.50% in annual fees over 10 years, the account balance for the lower cost option would be almost $32,000 higher when using an 8% market return for both. Over 20 years, the difference is $116,000.
Though I’ve stayed with my mediocre employer through thick and thin for a lot of reasons, the company could make some minor changes to their benefits and 401k plan that would save the employees a lot of money. Unfortunately, they don’t take the time to or don’t understand the benefit to employees. That’s part of what makes them mediocre.
My 401k balance is getting high enough that the fees are starting to make me want to leave my job, just so I can transfer the balance to Fidelity or TD Ameritrade.
* Personal Capital has a free 401k fee analyzer built into the platform. Use it to analyze the impact of fees for your own 401k plan, compounded over time.
5. Aggressively Pursue a Tax-Advantaged Investing Strategy
The U.S. tax code contains about four million words. That’s about four times as many words as all seven Harry Potter books combined.
Buried in those words are loopholes and advantages that benefit people in the know. 401ks, 403bs, IRAs and Roth IRAs all fit into this category.
If you’re not taking advantage of these programs either through your employer or on your own, start now. Doing do gives you both short and long term tax advantages that can lead to tens or even hundreds of thousands of dollars of investment income and growth over time.
Make sure you’re contributing to an employer 401k (if they have it) to benefit from pre-tax savings and tax-deferred growth, which can save you thousands every year. You’ll get free money too if your employer offers a match.
Utilize a Roth IRA to grow your investments tax-free without paying capital gains or dividend taxes. Then withdrawal the money and pay no taxes once you reach retirement age. Or, the Roth makes a solid early retirement tool because you can withdraw the original contributions penalty-free anytime.
Then double-down by opening a spousal Roth IRA if you’re married.
Another creative tax-advantaged savings strategy is the solo 401k. With this plan, a self-employed worker can contribute the normal $18,000 (for 2016). In addition, the employer (i.e. the individual) is allowed to make a profit sharing contribution of up to 25% of pay. Between the two, a total of $53,000 (2016) can be contributed to an account.
That is serious tax-advantaged savings!
6. Move Somewhere Cheaper
Moving to a lower cost area is a no-brainer powerful financial maneuver. However, it’s not for everybody. Family, career and a number of other factors weigh into this decision. But regardless of emotional impact, moving from an expensive city to a cheaper one can save a ton of money.
Doing this is easier these days with the popularity of remote working. I know a few people that left the DC metro area for cheaper pastures but managed to maintain their job and DC salary. One couple bought a $300,000 home in a smaller city that would easily cost north of $1 million near their old home.
Housing is the biggest cost for individuals and families in an area such as DC, San Francisco or New York. So why not move further out into the suburbs or to a less expensive city? The cost savings over time can reach the hundreds of thousands of dollars.
Or, go travel the world. It’s cheaper than you think.